Australian Energy Market Operator Tones-down Gas Shortage Warnings

Australian energy market operator released June 15 new toned-down warnings of tight gas supply for the country’s east coast over the next couple of years.

The release follows the Australian Energy Market Operator’s (AEMO) forecasts in March which said the eastern seaboard states of New South Wales, Victoria and South Australia, could see a shortfall in gas-powered electricity by as soon as the Australian summer of 2018-2019.

The new Energy Supply Outlook suggests "gas supply remains tight, however the latest industry projections of gas production are just sufficient to meet projections of gas demand,” AEMO’s chief executive officer Audrey Zibelman said.

While AEMO sees domestic gas supply and demand as finely balanced, the scales could be tipped by LNG exports, the level of domestic gas demand and the adequacy of coal supplies, the report said.

LNG exports from the Curtis Island LNG terminals at the Port of Gladstone in Queensland, Australia, have fallen short of AEMO’s previous expectations and any variations “could be pivotal” in determining whether a gas shortfall arises, it said.  

Based on updated production projections, and using the March forecasts of gas demand for LNG exports, AEMO projects that approximately 170 PJ of gas will be available for supply to gas-powered generation in 2017-18. And, that would not be sufficient to meet potential gas-powered generation demand, it said.  

“Gas demanded by Curtis Island LNG trains has, however, recently been observed to trend down form the projections used in the March 2017 GSOO Neutral scenario. Actual demand was lower than the forecast by up to 17 PJ in May 2017,” it said.

Members of the gas industry used the report’s findings to criticise the government’s plan to put export controls on LNG.

“The Energy Supply Outlook, released today by the Australian Energy Market Operator, confirms that there is no need for the Commonwealth to restrict Queensland’s LNG exports,” the Australian Petroleum Production & Exploration Association (APPEA) said.

APPEA chief executive Malcolm Roberts said the gas supply-demand situation may be even more positive than the ESO suggests.

“It does not capture new gas supply announced after May 1, such as Arrow’s Tipton Fields project, and, inexplicably, does not revise the high forecasts of LNG demand for gas,” he said.

CEO Kevin Gallagher of Santos – which operations the Gladstone LNG facility at Curtis Island – said the findings show that “there is no gas shortage” and that the politics of the situation have taken over.

“We are being asked to believe that high prices and shortages in supply are the fault of the LNG exporters whilst at the same time State and Territory governments have either banned or restricted gas exploration and production,” he said.

“Today’s situation is a national issue that requires federal and state Governments to develop a National Energy Plan. That plan needs to address the production of gas for domestic consumption and export. It also needs to address structural issues regarding the transport of gas to market,” he said. 

Nathan Richardson